The Kenyan shilling is expected to remain under pressure over the next week due to low dollar inflows, while the Nigerian naira could weaken further after a dollar sale by a big market player failed to lift the local unit.
Kenya’s shilling is expected to remain under pressure, undermined by increase importer dollar demand and low supply of hard currency.
The currency of East Africa’s biggest economy closed at 88.75/85 to the dollar, compared with last Thursday’s close of 88.60/70.
Traders also said increased shilling liquidity in the money markets would put the local currency under strain, and forecast the local currency could weaken further to 89.00 to the dollar.
“The last time we were here, the central bank intervened. If they are quiet, I think the market will target 89.00,” Chris Muiga, a senior trader at National Bank of Kenya.
In late August, the central bank sold dollars into the market, after the shilling hit 88.80/90, which at the time was its lowest level since December 2011.
Muiga said the shilling could weaken to the 89.50 to the dollar level if it crossed the 89.00 shilling mark.
The Nigerian naira is set to weaken further next week against the greenbuck after the dollar sale by the state-owned energy firm NNPC on Wednesday failed to lift the currency.
The local unit was trading around 163.10 to the dollar at 1438GMT, weaker than 162.87 a dollar Wednesday’s close.
NNPC sold around $300 million, but this was not enough to give support to the local currency. The NNPC accounts for the bulk of dollars traded on the interbank market.
“We expect the naira to weaken further next week against the background of growing demand from importers and other foreign exchange end-users and a shortage of dollar supply,” one dealer said.
Dealers said expectation of large dollar sale by the NNPC had kept the market in check early in the week and the naira range bound.
The Ugandan shilling is expected to trade in a narrow range next week with corporate appetite expected to be muted, although interbank demand could put it under some pressure.
At 1103 GMT commercial banks quoted the shilling at 2,605/2,615, compared to last Thursday’s close of 2,603/2,613.
“The demand that’s coming through from corporates is very low, I don’t see it driving the shilling in any major direction,” said Faisal Bukenya, head of market making at Barclays Bank.
Bukenya said the shilling would play in the 2,600-2,620 range.
Traders say the local currency, which has lost 3.3 percent of its value in the year to date, could turn significantly bearish around October as importers soak up greenbacks to pay for goods shipments ahead of December shopping.
Tanzania’s shilling is forecast to trade range-bound over the next week due to a slowdown in demand for dollars.
Commercial banks quoted the shilling at 1,667/1,672 to the dollar on Thursday, compared with 1,655/1,665 a week ago.
Most of the demand from energy, oil, telecoms and some few manufacturing companies was covered during the week, said Joseph Maji, a trader at CRDB Bank.
“The supply of dollars into the market has dwindled as we see a decline in export proceeds from cash crops, especially cotton and coffee,” he said.
Market participants said they expect the shilling to trade in the 1,660-1,670 range over the coming days.
The central bank or Bank of Tanzania said on its website that it traded $49.25 million on the interbank foreign exchange market this week.
The Zambian kwacha is likely to reverse some losses against the US dollar next week as companies convert the greenback into the local unit to pay taxes.
At 0806 GMT on Thursday, commercial banks quoted the currency of Africa’s second largest copper producer at 6.1500 per dollar from 6.0500 a week ago.
“We expect the kwacha to be a bit strong compared to this week because corporation tax is due at the middle of the month,” Bwalya Mwanza, a forex trader at BancABC Zambia said.
The kwacha this week came under pressure due to limited dollar inflows in the absence of a debt auction and broad strengthening of the greenback against other global currencies, he said.